DIRECTORSThe Directors of your Company hereby present the 23rd Annual Report of the Companytogether with the Accounts for the Year ended 31 st March, 2010.
FINANCIAL RESULTS
| 2009-2010 | 2008-2009 |
| Rs in crores | Rs in crores |
| Sales | 30.59 | 31.02 |
| Profit before Interest Depreciation & Tax | 5.25 | (15.49) |
| Less: Interest | 10.06 | 1.34 |
| Profit / (Loss) before Depreciation & Tax | (4.81) | (16.83) |
| Less: Depreciation | 4.12 | 4.84 |
| Profit / (Loss) before Tax | (8.93) | (21.67) |
| Less: Provision for Fringe Benefit Tax | 0.09 | 0.15 |
| Profit / Loss for the year | (9.02) | (21.82) |
OPERATIONS AND BUSINESS PLAN
During the year, under review your company has achieved total sale of Rs.30.59 crores,comprising the sale of Time Shares Rs.7.46 crores and through Resort operations Rs.23.13crores.
A strengthened financial position has helped your company clear its past liabilitiesand become a totally debt-free company. The immediate focus is the refurbishment ofresorts. 15 % of rooms have been taken up for refurbishment and over the next three years,your company intends to complete the entire refurbishment efforts across all existingproperties. With 10 owned and 3 leased resorts, plans are on to open 11 new resorts in thenext 10 years. And construction permission is available for 1,150 rooms in current and newresorts.
A professional sales team is being hired and trained to drive the Vacation OwnershipSales and increase membership to 2,60,000 from 1,08,251 with 55% active members, in thenext ten years. Your company's endeavor to provide customer delight will also extend toproviding contemporary Customer Service experience to vacation ownership customers andhotel guests. Finally, on the Marketing front, your company has got itself a new brandidentity. And major alliances and cross selling arrangements are being rolled out to takethe brand to every target family in the country and make it a brand to remember in theproduct category.
Settlement of Loans and Liabilities
Your Company has settled substantial creditors including Banks and FinancialInstitutions such as ICICI, GIIC, TFCI, SIDBI, Bank of Punjab Limited (HDFC), CatholicSyrian Bank Limited, South Indian Bank Limited and other trade creditors and also settledmost of the Statutory dues and employees dues with the money raised in the above allotmentof Equity Shares on preferential basis. In addition, a part of the money raised was usedfor refurbishing of resorts.
Refurbishment of Resorts
As reported in previous report, internal painting, change of upholstery, replacement offurniture, changing of flooring and up-gradation of Toilets and other Amenities were takenup wherever required. All out efforts have been taken to complete the balancedevelopmental work with the funds available and the same is expected to be completedshortly. The customer feed back on the developmental work, amenities provided andrenovation of resorts are satisfactory and encouraging.
Directors
Your Directors, Mr. M.N. Rangamani and Mr. S. Sethuraman retire by rotation at theensuing Annual General Meeting and being eligible, offer themselves for reappointment.
EMPLOYEES STOCK OPTION SCHEME
Under the Employees Stock Option Scheme - 2007, 19,44,000 of Equity shares of Rs.10/-each were allotted.
Also 5,56,000 options which were surrendered are included in the Common pool and wasgranted to eligible employees on 30-10-2009.
Under the Employees Stock Option Scheme 2009, 15,00,000 Stock Options were granted toemployees on 07-10-2009.
The details of options granted under ESOS 2007 and ESOS 2009 are given in Annexure"A" in accordance with SEBI (Employees Stock Option Scheme & Employees StockPurchase Scheme) Guidelines 1999 and any modifications thereto.
SHARE CAPITAL
Your Company has raised Rs.33.34 crores through issue of 95,26,500 equity shares ofRs.10/- each at a price of Rs.35/- (including the premium of Rs.25/-per equity share) andRs.0.44 crores through issue of 5,00,000 warrants of Rs.35/- each (being 25%) on04-06-2009. Also your Company has raised Rs.0.83 crores through issue of 8,34,000 equityshares of Rs.10/- each at par, under ESOS-2007 and Rs.4.06 crores (being 90%) throughissue of 12,90,000 equity shares of Rs.10/- at a price of Rs.35/-(including a premium ofRs.25/- per equity share) on conversion of warrants on 2503-2010.
Further during the Current year your Company has raised Rs.1.11 Crores through issue of11,10,000 Equity Shares under ESOS-2007 on 05-04-2010, Rs.2 Crores (being 90%) throughissue of 6,35,000 equity shares of Rs.10/- at a price of Rs.35/-(including a premium ofRs.25/- per equity share) on conversion of warrants on 08-04-2010 and Rs.3.39 Crores(being 90%) through issue of 10,75,000 equity shares of Rs.10/- at a price of Rs.35/-(including a premium of Rs.25/- per equity share)
On conversion of warrants on 04-082010, and Rs.1.05 Crores (being 75%) through issue of4,00,000 equity shares of Rs.10/- at a price of Rs.35/-(including a premium of Rs.25/- perequity share) on conversion of warrants on 20-08-2010.
ISSUE OF 30,00,000 WARRANTS ON PREFERENTIAL BASIS.
The Members at the Extraordinary General Meeting held on 28-01-2009 have passed aspecial resolution for issue and allotment of 30,00,000 warrants at a price of Rs.35/- perwarrant on preferential basis. Subsequently, 30,00,000 Warrants were allotted at the BoardMeeting held on 12-02-2009. The In-principle approval was granted by both Bombay StockExchange Limited (BSE) and Madras Stock Exchange Limited (MSE).The 12,90,000 Warrants wereconverted into 12,90,000 equity shares on 25th March, 2010, 6,35,000 Warrants wereconverted into 6,35,000 equity shares on 8th April, 2010 and the balance 10,75,000Warrants were converted into 10,75,000 equity shares on 4th August 2010.
ISSUE OF 5,00,000 WARRANTS ON PREFERENTIAL BASIS.
The Members at the Extraordinary General Meeting held on 25-05-2009 have passed aspecial resolution for issue and allotment of 5,00,000 warrants at a price of Rs.35/- perwarrant on preferential basis. Subsequently, 5,00,000 Warrants were allotted at the BoardMeeting held on 04-06-2009. The In-principle approval was granted by both Bombay StockExchange Limited (BSE) and Madras Stock Exchange Limited (MSE). Out of the above, 4,00,000warrants were converted into 4,00,000 equity shares on 20th August, 2010.
ISSUE OF 95,26,500 EQUITY SHARES ALLOTTED ON PREFERENTIAL BASIS.
The Members at the Extraordinary General Meeting held on 25-05-2009 have passed aspecial resolution for issue and allotment of 95,26,500 Equity shares of Rs. 10/- each ata price of Rs.35/- per share (including the premium of Rs.25/- per equity share).Subsequently, 95,26,500 Equity shares were allotted at the Board Meeting held on04-06-2009. The said Equity Shares are listed with Madras Stock Exchange Limited andBombay Stock Exchange Limited.
PROCEEDS OF PREFERENTIAL ISSUES
The details of utilization of proceeds of Preferential issues upto 31st March, 2010 aresetout in the statement attached herewith in Annexure B.
STATUS OF PROCEEDINGS UNDER SECTION 408 OF THE COMPANIES ACT, 1956
The Members are informed that the Hon'ble High Court was pleased to pass an Order,granting stay of the Orders of the Hon'ble Company Law Board, Chennai, pending disposal ofthe Appeal under CMA No.3647 of 2005. The stay is still in force.
FIXED DEPOSIT
Your Company has not accepted any fresh Deposits from the public during the currentyear.
AUDITORS
The Joint-Auditors of the Company M/s.R.Subramanian and Company, Chartered Accountants,Chennai, and M/s.V.Sankar Aiyar & Co., Chartered Accountants, Chennai, retire at theConclusion of this Annual General Meeting and are eligible for reappointment.
The Company has received confirmation that their appointment will be within the limitsprescribed under Section 224(1 B) of the Companies Act, 1956. The Audit Committee of theBoard has recommended their appointment. The necessary resolution is being placed beforethe shareholders for approval.
AUDIT, INVESTOR GRIEVANCES, REMUNERATION AND COMPENSATION COMMITTEES
In terms of Clause 49 of the Listing
Agreement of the Stock Exchanges and pursuant to the provisions of Section 292A of theCompanies Act, 1956, the details pertaining to Audit Committee, Investor GrievancesCommittee, Remuneration Committee, Share Transfer Committee and Compensation Committee arefurnished in the Report on Corporate Governance which is annexed herewith.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
In terms of Clause 49 of the Listing Agreement of the Stock Exchanges, ManagementDiscussion and Analysis Report is annexed herewith and forms part of this Report.
REPORT ON CORPORATE GOVERNANCE
The Company has complied with the Corporate Governance Code as stipulated under Clause49 of the Listing Agreement with the Stock Exchanges. A separate section on CorporateGovernance, along with a certificate from the Statutory Auditors of the Company confirmingthe compliance is annexed.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors' to the best oftheir knowledge and belief confirm that:
1. in the preparation of the Profit and Loss Account for the Financial Year ended 31 stMarch, 2010 and the Balance Sheet as at that date ("Annual Accounts"), theapplicable accounting standards have been followed;
2. that the Directors' had selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonable and prudent so as togive a True and Fair view of the state of affairs of the Company at the end of thefinancial year and of the profit and loss of the Company for that year;
3. that the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act, 1956for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
4. that the Directors had prepared the Annual Accounts for the Financial Year ended31st March, 2010 on a going concern basis.
Subsidiary Companies
As on 31st March, 2010, Your Company had three Subsidiary Companies namely,
1. M/s.Sterling Holidays (Ooty) Limited
2. M/s.Sterling Holiday Resorts (Kodaikanal) Limited and
3. M/s. Manchanda Resorts Private Limited
The accounts of the subsidiaries are consolidated with the accounts of the Company inaccordance with Accounting Standards 21 (AS 21) prescribed by The Institute of CharteredAccountants of India. The consolidated accounts duly audited by the Statutory Auditors andthe consolidated financial information of the subsidiaries form part of the annual report.
An application in terms of Section 212(8) of the Companies Act, 1956 has been made tothe Central Government, seeking exemption from attaching the balance sheet and profit andloss account of the subsidiaries along with the report of the Board of Directors and thatof the auditors' thereon, with the Company's accounts and the Company awaits the approvalof the Central Government.
The annual accounts, reports and other documents of the subsidiary companies will bemade available to the Members and investors on receipt of a request from them.
The annual accounts of the subsidiary companies will be available at the registeredoffice of the Company and at the respective subsidiary companies concerned, if any memberor investor wishes to inspect the same during the business hours of any working day.
COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES,1988
In terms of the above Rules, the particulars relating to Conservation of Energy,Technology Absorption and Foreign Exchange Earnings and Outgo required in terms of Section217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars inthe Report of Board of Directors) Rules, 1988 are given in Annexure "C" whichforms part of the Directors' Report.
PARTICULARS OF EMPLOYEES
Details of remuneration paid for the Financial Year ended 31.03.2010, as per Section217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees)(Amendment) Rules, 2002, are provided in Annexure-"D" which forms part of theDirectors' Report.
DEMATERIALISATION OF EQUITY SHARES
As mentioned in our earlier Annual Reports, the Company's Equity Shares are in thecompulsory demat mode with effect from 28th August, 2000, as per Circular No.SMDRP /Policy / CIR-23/2000 dated 29th May, 2000 issued by
Securities and Exchange Board of India (SEBI).This has been facilitated througharrangement with M/s.National Securities Depository Limited (NSDL) and M/s.CentralDepository Services (India) Limited (CDSL). A large number of our shareholders have takenadvantage of dematerialisation facility. M/s.Cameo Corporate Services Limited, Chennai,has been appointed as the Registrar and Share Transfer Agents of the Company.
CEO/CFO CERTIFICATION
The Joint-Managing Director and the Senior Vice President Finance have submitted acertificate to the Board regarding the Financial statements and other matters as requiredunder Clause 49V of the Listing Agreement.
"OPEN OFFER" ANNOUNCED BY M/S.INDUS HOSPITALITY FUND LTD AND M/S.INDIADISCOVERY FUND LTD.
The Board of Directors of the Company at their meeting held on 04-06-2009 have allotted78,82,200 equity shares to M/s.Indus Hospitality Fund Ltd, pursuant to the Specialresolution passed at the Extraordinary General Meeting held on 25-05-2009. M/s.lndusHospitality Fund Ltd along with M/s.India Discovery Fund Ltd have issued PublicAnnouncement on 08-06-2009, to acquire 95,85,717 fully paid Equity Shares of the Companyat an offer price at Rs.36.25/- per share in accordancewith the Regulations and Guidelines issued by SEBI.
M/s.Gujarat Industrial Investment Corporation Limited (GIIC) have filed a Civil suit inthe Hon'ble Court of 2nd Additional Senior Civil Judge at Gandhinagar, Gujrat inconnection with the convening of Extraordinary General Meeting on 25th May, 2009, whereinthe allotment of Equity Shares on preferential basis to M/s.lndus Hospitality Fund Limitedand M/s.Blue Ocean Investment Trust was approved by the Shareholders. However, the Companyhas taken necessary legal action to defend the case in this regard. Subsequently, asettlement has been arrived at between the Company and GIIC. As per the settlement, theabove mentioned Civil Suit was withdrawn by GIIC.
Necessary steps are being taken by the Investors to complete the Open Offer.
ACKNOWLEDGEMENTS
The Board of Directors take this opportunity to express their sincere thanks to theCentral and State Governments, Financial Institutions and Bankers and other Creditors fortheir valuable support and assistance during this period. The Directors also wish to thankthe Shareholders and Timeshare Customers who have supported the Company in this hour ofneed. Our Directors look forward to receiving continued support from them.
The Directors also wish to thank the employees of the Company for their dedicatedperformance and also place on record their wholehearted commitments to the Company andcombined efforts to turnaround the Company.
| For and on behalf of the Board |
| Place:Chennai | R.SUBRAMANIAN |
| Date .28-08-2010 | Chairman and Managing Director |
ANNEXURE "A" FORMING PART OF THE DIRECTORS' REPORT
Disclosures in compliance with Clause 12 of the Securities and Exchange Board of India(Employee Stock Option Scheme) Guidelines, 2005, as amended, are setout below.
| SI. No | Description | ESOS-2007 | ESOS-2009 |
| 1. | Total number of options under the Plan | 25,00,000 | 15,00,000 |
| 2. | Options granted | 25,00,000 | 15,00,000 |
| 3. | Pricing formula | Face Value | Face Value |
| 4. | Options vested | 25,00,000 | Nil |
| 5. | Options exercised | 19,44,000 | Nil |
| 6. | Total number of shares arising as a result of exercise of option | 19,44,000 | Nil |
| 7. | Options lapsed during the year | Nil | Nil |
| 8. | Variation of terms of options | Nil | Nil |
| 9. | Money realised by exercise of options | Rs.1,94,40,000/- | Nil |
| 10. | Total number of options in force | 5,56,000 | 15,00,000 |
| 11. | Employee wise details of options granted to: | N. Chandrasekaran | 4,12,000 | K. Chandrasekaran | 4,12,000 |
| (1) Senior Management | Annadurai | | M.N. Rangamani | 4,12,000 |
| Number of Employees | M. Balasubramaniyan | 1,44,000 | R. Mohan | 4,12,000 |
| | | | M. Balasubramaniyan | 2,64,000 |
| (2) Employees holding 5% or more of the total number of options granted during the year | Nil | | Nil | |
| (3) Identified employees who were granted option, during any one year equal to or exceeding 1 % of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant. | Nil | | Nil | |
| 12. | Diluted Earnings per share pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 | (2.45) | (2.08) |
| 13. | Where the Company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the options. The impact of this difference on profits and on EPS of the Company. | Not Applicable | Not Applicable |
| 14. | Weighted average exercise prices and weighted average fair values of options separately for options whose exercise either equals or exceeds or is less than the market price of the stock. | Nil | Nil |
| 15. | A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information: | | |
| (1) risk free interest rate | Market Price at the time | Market Price at the time |
| (2) expected life | of option grant | of option grant |
| (3) expected volatility | | |
| (4) expected dividends and | | |
| (5) the price of the underlying share in market at the time of option grant | | |
ANNEXURE - B TO THE DIRECTORS' REPORT
Details of Utilization of Preferential lssues up to 31st March, 2010
| (Rs. in Lakhs) |
| Particulars | As on 31st March, |
| 2010 |
| Allotment of 95,26,500 Equity Shares to other than Promoter | 3334.27 |
| Allotment of 5,00,000 Warrants to other than Promoter 25% amount received (Rs.8.75 per Warrant) | 43.75 |
| Allotment of 12,90,000 Equity shares on conversion of Warrants to Promoter's Group - 90% amount received (Rs.31.5/- per warrant) | 406.35 |
| Allotment of 8,34,000 Equity shares under Employees Stock Option Scheme 2007 (Rs.10 per share) | 83.40 |
| Total Funds received | 3867.77 |
| Settlement of Loans, Creditors, Statutory Liabilities & Refurbishments of Resorts | 3213.42 |
ANNEXURE C - TO THE DIRECTORS' REPORT
Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988
| A. Conservation Energy | Not Applicable |
| B. Technology Absorption | Not Applicable |
| C. Foreign Exchange Earnings and Outgo: | |
| (i) Activities relating to exports incentives taken to increase Exports development of new export and markets for products and services and export plans | Nil |
| (ii) Total Foreign exchange earned | Nil |
| (iii)Total Foreign exchange used | Nil |
ANNEXURE D - TO THE DIRECTORS' REPORT
Information as per section 217 (2A) of the Companies Act, 1956 read with the Companies(particulars of Employees) (amendment) rules, 2002 and forming part of the Directors'Report - details of remuneration paid for the Financial Year ended 31st March, 2010
| SI. No. | Name of the Employee | Age | Designation of the Employee / Nature of duties | Qualification & Experience | Date of Commencement of Employment | Previous Employment | Remuneration (Rs.) |
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) |
| 1. | R. Mohan* | 47 | Sr. Vice President -Finance | B.Com, ACA 23 Years | 04-04-2005 | Regimanual Grey Ltd., Ghana, W. Africa | 24,32,684/- |
| 2. | Praveen Tonge** | 40 | Zonal Head -TS Sales | B.Sc, 20 Years | 19-01-2010 | Ramee Holidays & Resorts Pvt. Ltd., | 7,23,141/- |
*Holds more than 2% of the Equity shares of the company ** Employed for part of theyear
Note:
• Remuneration as shown above includes Salary, Allowances, Leave TravelAssistance, Medical facilities and perquisites valued in terms of actual expenditureincurred by the Company in providing the benefits to the employee excepting in case,perquisites value as per Income Tax Rules, has been adopted. In addition to the above theEmployees are eligible for Provident Fund and Gratuity in accordance with the rules of theCompany.
• The employees are the whole-time employees of the Company and the employment issubject to the rules and regulations of the Company.
• None of the employee is related to any Director of the Company.
| For and on behalf of the Board |
| Place: Chennai | R.SUBRAMANIAN |
| Date : 28-08-2010 | Chairman and Managing Director |